Inventories pile-up due to fewer mobile sales post demonetisation

Retailers, who have seen their sales plunge due to the cash crunch among consumers, have almost stopped adding stock, say industry analystsGulveen Aulakh&Danish Khan | ET Bureau | Updated: November 15, 2016, 09:15 IST

Mobile handset makers are seeing an inventory pileup, which may force them to alter production schedules and defer launches as retailers, who have seen their sales plunge due to the cash crunch among consumers, have almost stopped adding stock, say industry and analysts.

They add that the situation since the demonetisation announcement on November 8 may also affect shipment numbers for handset makers in the October-December quarter that usually sees lower sales than the previous one, which caters to the peak festive season demand.

“Dealers have been sitting idle, some shops are also closed, because consumers are not coming to buy phones and sellers are not accepting old currency notes.

There’s an inventory pile-up happening and this dry spell will continue till November 25, till the time cash is easily accessible to consumers,” said Ravinder Zutshi, mobile council head at Consumer Electronics and Appliances Manufacturers Association (CEAMA).

Several brick-and-mortar retail stores across the Delhi-NCR region that ET spoke to said sales were down 70-80% from pre-demonetisation days, which have left them with significant quantities of unsold stock — mainly lower priced ones, which are usually bought through cash. Large retail format stores, which have the option of payment by cards, unlike most smaller mom-and-pop retailers, also said sales were sharply down immediately for the first few days after demonetisation, but have improved slightly since.

“There are no customers. Our existing stock isn’t selling, so where is the question of ordering more stock,” said Rajesh Chauhan, owner of a small brick-andmortar shop selling handsets in the NCR region, adding that sales for him are down by about 80%.

Consumers have put large appliances and smaller electronic items such as phones lower down on their priority lists after the government banned use of Rs 500 and Rs 1,000 currency notes from last Wednesday.

Gionee India managing director Arvind Vohra said sales had declined 30% in the first few days of the ban, but have recovered in the last couple of days. They are now down 10-15%, he said. Lava chief operating officer Navin Chawla said the handset maker has seen an average 14-15% drop in sellouts in the past few days.

Handset makers such as Micromax, Lava and Gionee, television and white goods makers are all watching the situation closely, amid the inventory pile-up, but are yet to take a call on modifying their production schedules.

The inventory pile-up for TV and white goods industry is still insignificant as of now since the industry anyway adjusts its production after Diwali when sales as a routine take a dip, added industry insiders.

“We are cautious and are watching the situation closely. There could only be corrections in production lines…That decision will take 10 days down the line,” Vohra said.